Ventures v. The Repub.a Bolivariana De Venezuela

• Decision Date: 23 September 2010
• Docket Number: Nos. 09-3424, 09-3725.,s. 09-3424, 09-3725.
• Citation: 622 F.3d 513
• Parties: DRFP L.L.C., dba Skye Ventures, Plaintiff-Appellee, v. The REPUBLICA BOLIVARIANA DE VENEZUELA; The Venezuelan Ministry of Finance, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

622 F.3d 513

DRFP L.L.C., dba Skye Ventures, Plaintiff-Appellee,

v.The REPUBLICA BOLIVARIANA DE VENEZUELA; The Venezuelan Ministry of Finance, Defendants-Appellants.

Nos. 09-3424, 09-3725.

United States Court of Appeals,Sixth Circuit.

Argued: June 9, 2010.

Decided and Filed: Sept. 23, 2010.

Rehearing and Rehearing En Banc Denied Dec. 15, 2010.

ARGUED: Jay Kelly Wright, Arnold & Porter LLP, Washington, D.C., for Appellants. Charles H. Cooper, Jr., Cooper & Elliott, LLC, Columbus, Ohio, for Appellee. ON BRIEF: Jay Kelly Wright, Robert A. Schwartz, Brandie N. Weddle, Arnold & Porter LLP, Washington, D.C., Daniel W. Costello, David S. Bloomfield, Jr., Porter, Wright, Morris & Arthur LLP, Columbus, Ohio, for Appellants. Charles H. Cooper, Jr., Rex H. Elliott, John C. Camillus, Cooper & Elliott, LLC, Columbus, Ohio, for Appellee.

Before: MARTIN, RYAN, and KETHLEDGE, Circuit Judges.

RYAN, J., delivered the opinion of the court, in which KETHLEDGE, J., joined. MARTIN, J. (pp. 520-23), delivered a separate opinion concurring in part and dissenting in part.

OPINION

RYAN, Circuit Judge.

This case presents questions concerning federal courts' jurisdiction over foreign nations and the doctrine of forum non conveniens.

DRFP L.L.C., doing business as Skye Ventures, is the holder of two promissory notes allegedly issued by the government of Venezuela. Skye demanded payment on the notes, and when it was refused, Skye filed suit against Venezuela and its Ministry of Finance in the federal district court in Columbus, Ohio. Venezuela sought dismissal of the case, claiming immunity from United States federal court jurisdiction and the defense of forum non conveniens. The district court held that dismissal was not warranted because Venezuela was not immune from jurisdiction by virtue of the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1602, and that the doctrine of forum non conveniens did not apply. Venezuela now appeals.

For reasons we shall explain, we will hold that Venezuela is not immune from federal court jurisdiction, but that the district court must reconsider the forum non conveniens question.

I.

According to the plaintiff's complaint, on December 7, 1981, a state-owned bank in Venezuela, the Banco de Desarrollo Agropecuario, issued some no-coupon bearer promissory notes. The notes stated that they were payable to the holder ten years and one day after the date of issue, although the maturity date was later extended to December 1999. The notes also stated that the Venezuelan Ministry of Hacienda (the precursor to the Ministry of Finance) guaranteed payment of the notes, and that the government of Venezuela backed the notes.

A Panamanian corporation, Gruppo Triad-FCC SPA, acquired the two promissory notes with which we are concerned in this case, each in the amount of $50 million. After Gruppo demanded payment on the notes in 2001, the Venezuelan Ministry of Finance conducted an investigation into their validity. In October 2003, the Venezuelan Attorney General issued an opinion declaring that the notes were valid. Based on this opinion, the plaintiff, Skye, an Ohio limited liability company whose principal office is in Columbus, Ohio, obtained the two notes from Gruppo and demanded payment of the notes at its office in Columbus. When Venezuela refused to honor the notes on the ground that the instruments were forgeries, Skye filed suit to collect on the notes in the federal district court in Columbus.

On January 31, 2005, while continuing to insist that the notes were invalid forgeries, Venezuela filed a motion requesting dismissal of the case on two grounds: (1) lack of jurisdiction due to sovereign immunity and (2) forum non conveniens. Without deciding the motion, the magistrate judge ordered that discovery proceed, and the motion remained undecided for four years. On July 24, 2007, Venezuela notified the district court that the Venezuelan Supreme Court had issued a decision that affected the issues in the case. The magistrate judge then modified his earlier order concerning discovery and, on May 27, 2008, directed the parties to file supplemental briefs addressing the issues of sovereign immunity and forum non conveniens.

On February 13, 2009, the district court issued an opinion denying Venezuela's motion to dismiss. Specifically, the district court held: (1) that Venezuela was not immune from suit pursuant to the FSIA's commercial activity exception and the court had jurisdiction of the case; and (2) that the doctrine of forum non conveniens did not apply.

II.

Despite Venezuela's insistence that the notes are forgeries, we must assume, for purposes of deciding the jurisdictional issues before us, that they are valid.

We review questions of subject matter jurisdiction, including issues of sovereign immunity, de novo. O'Bryan v. Holy See, 556 F.3d 361, 372 (6th Cir.), cert. denied, --- U.S. ----, 130 S.Ct. 361, 175 L.Ed.2d 27 (2009).

Generally, a foreign state is immune from suit in the United States. Republic of Iraq v. Beaty, --- U.S. ----, 129 S.Ct. 2183, 2186, 173 L.Ed.2d 1193 (2009). The FSIA, however, sets out several statutory exceptions to jurisdiction, including the “commercial activity exception” of Section 1605(a)(2). Am. Telecom Co. v. Republic of Lebanon, 501 F.3d 534, 537-39 (6th Cir.2007). The FSIA provides, in part:

(a) A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case-

....

(2) in which the action is based ... upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.

28 U.S.C. § 1605(a)(2) (emphasis added). The party claiming an exception to immunity bears the burden of production to demonstrate that an exception applies. Keller v. Cent. Bank of Nigeria, 277 F.3d 811, 815 (6th Cir.2002). The party asserting immunity bears the ultimate burden of persuasion. Id. Here, the district court held that the commercial activity exception to Venezuela's immunity applied to the facts of this case, and that the district court would exercise jurisdiction.

It is undisputed that Venezuela is a foreign state normally entitled to sovereign immunity. The parties do not dispute that the activities involving the two promissory notes can be characterized as a “commercial activity.” 28 U.S.C. § 1605(a)(2). The dispositive question at this stage of the case is whether the “commercial activity of the foreign state” caused a “direct effect in the United States.” Id.

There are really two aspects to the “direct effect” question. The first is whether the bearer of the notes, Skye, is restricted by contract or by the terms of the notes in selecting the United States as a jurisdiction in which to seek and enforce payment of the notes. The second is whether, if Skye is not precluded from demanding that payment be made in the United States, the defendants' refusal to honor Skye's demand for payment in Ohio is an “act [that] causes a direct effect in the United States.” Id. Our answer to the first question is no, and to the second, yes.

Both notes explicitly state that the terms and conditions of the notes are governed by the law of Switzerland and “by the regulations of the International Chamber of Commerce in Paris and the United States Council of the International Chamber of Commerce [ (ICC) ] Brochure ‘322’ last revised edition.” Skye introduced the affidavit of an expert, Professor Marco Villa, a Swiss lawyer, whose qualifications to testify as to Swiss law were not challenged by the defendants. Professor Villa, after examining the two promissory notes, testified that under Swiss law, and the ICC Rules on Collection which are recognized under Swiss law, the bearer of the notes may sue for collection in the jurisdiction of his choice, including the United States of America.

Another witness, Gary Post, accepted by the district court as qualified to give an opinion as to “the ICC's regulations in its Rules on Collection,” stated in an affidavit that in his opinion, the ICC regulations permit Skye to seek collection on the notes in the jurisdiction of its choice, including Ohio. DRFP L.L.C. v. Republica Bolivariana de Venezuela, No. 2:04-cv-793, 2009 WL 414581, at *8 (S.D.Ohio Feb. 13, 2009). Therefore, it would appear that by the terms of the notes, including the provision that Swiss law govern any dispute over terms and conditions, Skye was entitled to demand and enforce payment in Ohio.

The second aspect of Venezuela's immunity argument-the question whether Venezuela's refusal to honor Skye's demand for payment in Ohio caused a direct effect in the United States-is at the heart of the parties' dispute.

In ruling that Venezuela's refusal to honor the promissory notes caused a direct effect in the United States, the district court relied on the Supreme Court case of Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992). In Weltover, the Supreme Court stated that “an effect is direct if it follows as an immediate consequence of the defendant's ... activity.” Id. at 618, 112 S.Ct. 2160 (internal quotation marks and citation omitted). The Court rejected any requirement that the effect be either foreseeable or substantial. Id.

In Weltover, Argentina issued bonds, and the bondholders designated New York as one place where payment could be made. Id. at 607, 112 S.Ct. 2160. When Argentina refused to pay and “rescheduled” the bonds, the bondholders sued to collect. The Supreme Court concluded that Argentina's refusal to pay caused a “direct effect” in the United States. The Court explained: “Because New York was thus the place of performance for Argentina's ultimate contractual obligations, the rescheduling of those obligations necessarily had a ‘direct effect’ in the United States: Money that was supposed to have been delivered to a New York bank for deposit was not...